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While Aliaxandr Lukashenka assures Belarusians of economic stability, other high-profile officials warn of expected problems in the economy. The Government and National Bank sent a joint official letter to the Anti-Crisis Fund of the Eurasian Economic Community where they painted quite a gloomy picture.

They say that the macroeconomic situation in the country can worsen as a result of a number of internal and external factors. In particular, they anticipate that the foreign exchange and gold reserves will shrink to a critical level.

In reality, the situation might be even worse. As Belarus is facing a growing debt burden and several other economic risks, serious problems can arise already in 2013.
Lukashenka Promises Stability

In an interview on 9 August Aliaksandr Lukashenka tried to disprove any worries about Belarus' financial stability. He stated that the country has enough resources to repay all its debts and also continue to raise salaries.

In 2012-2013 the government will have to pay about $5 billion of its foreign liabilities. In Lukashenka's opinion, that's nothing. He underlined that the country's foreign exchange and gold reserves had been growing since the beginning of the year. Moreover, according to him, the authorities already have some additional money to make the upcoming credit payments. The sources of that money remained unclear.

At the same time Lukashenka made two interesting reservations. Firstly, he said that if any problems with the debt repayment still arise, salaries will automatically stop growing. Secondly, he reminded Belarusians that they can always count on help from Russia: "Even if we see that we don't manage to return a billion dollars to the Russians this year, I will somehow find an agreement with the Russian president to extend the repayment by one more year".

Belarusian analysts know that Lukashenka's rhetorical style suggests that such reservations are usually meaningful. Most probably they indicate that Lukashenka himself expects a tough situation with the debt repayment in the next two years.

The Government and the National Bank Are Less Optimistic

The Belarusian Prime Minister Mikhail Myasnikovich and the Head of the National Bank Nadzeya Yarmakova are even less optimistic about the near prospects of the country's economy. They co-authored a joint letter to the Anti-Crisis Fund of Eurasian Economic Community (EurAsEC) where they provided some details about the financial situation in Belarus.

They draw particular attention to the fact that in the months to come Belarus would have to repay part of its internal and external foreign exchange liabilities. This will cause the state reserves to shrink from $8,23 billion (as of 1 August) to approximately $6.4 billion in October. Given that the monthly level of imports in Belarus is nearly $4 billion, in October the state reserves will be enough to cover only $1.6 months of import.

The authorities then plan to attract more money from privatisation and foreign direct investments (FDI) so that to raise the level of the reserves to two months' imports on 1 January 2013. But this will still be quite low. International financial institutions (including the Anti-Crisis Fund of EurAsEC) normally consider state reserves as safe when they equal three months of imports.

The joint letter also emphasises that the Belarusian economy faces a number of serious risks, both internal and external. Among such risks it mentions:

a possible decline in demand for Belarusian goods on international markets
worsening of foreign trade conditions
lack of FDIs in the economy (including as a result of poor privatisation gains)
restricted access to credit resources on international financial markets
bad structure of the external liabilities: short-term credits and loans prevail over long-term.

The Government and the National Bank conclude their letter by saying that the existing risks and the precarious situation with the state reserves create "an objective need for the continuation of the EurAsEC Anti-Crisis Fund's credit program for Belarus.

The Real Situation Might Be Even Worse

Last week it became evident that the real situation in the Belarusian economy might be even more precarious than what the joint letter by the Government and the National Bank describes.

On 8 August Nadzeya Yarmakova stated that in 2013 the outflow of capital from Belarus would amount to at least $8 billion. Out of this sum $4 billion are the government's internal and external foreign exchange liabilities. And another $4 billion -- the export fee on oil products that Belarus will have to transfer to the Russian budget.

These numbers look quite alarming. Especially if the government fails to build up the state reserves and if the demand for Belarusian goods on the international markets declines. It becomes even more worrisome when we look at a couple of other factors.

For example, FDIs in the Belarusian economy. As was mentioned above, the officials hope that FDIs will help strengthen the state reserves despite the expected outflow of capital. But the level of foreign investments is still very low in Belarus. The official statistics says that in January-June the country got $605.7 million in FDIs. The number itself is not very high. But even more importantly, most of this sum came as reinvestment of income from previous investments. It means that new investors are not in a hurry to come to Belarus.

To make matters worse, more and more old investors leave the country and close their investment projects. The latest example is the State Reserve Fund of the Sultanate of Oman. Back in 2010 it bought a sizeable plot of land in central Minsk where it wanted to build a multi-functional complex to include business centres, hotels and residential houses. The sum of investments equalled an estimated $150 million.

However, after the 2011 Belarusian financial crisis and the devaluation of the national currency, the investment project is no longer profitable for the investors. After a period of uncertainty they announced the termination of the project. And this is, unfortunately, a vivid example of the unattractiveness of present-day Belarus for investors even from countries that are friendly to the Lukashenka's regime.

Thus, the Belarusian authorities can hardly rely on foreign investments. Nor can they count on income from privatisation as a source of hard currency. In January-June 2012 the state got only slightly more than $1 million from privatisation. And there is very little willingness to privatise more.

Therefore, the people of Belarus might feel the heavy burden of foreign debt already in 2013.